Legislative trend challenges ways of doing business

Sunday

ATLANTA - The moment of applying pressure on the accelerator of a Tesla sedan suggests instantly that it is not the usual luxury car, and its upstart manufacturer doesn't sell them the usual way.

If its engineers revel in what's been called "disruptive technology," its marketing managers are trying just as hard to disrupt the industry's traditional distribution system of a network of franchised dealers. To succeed, they have a team of lobbyists buttonholing Georgia legislators for test drives so they can pitch reasons to support House Bill 925.

The bill is part of a trend in this year's General Assembly session in which young companies seek novel ways of reaching customers that conflict with decades-old laws that lock in traditional business models. The trend includes microbrewers, online limousine services and solar-power installers.

Tesla Motors prefers to sell its electric cars through its own stores than the franchised dealers other automakers use. The technology is so novel and expensive that buyers typically require six visits to learn enough to become comfortable buying a $60,000 car that only goes 300 miles at a stretch, even if it can get there very quickly. Dealers strive to ensure customers don't leave in the car they arrived in on the first visit.

"The question, in my mind, is should government be legislating a business model," Tesla's Diarmuid O'Connell told the House Motor Vehicle Committee. He's the vice president of corporate and business development.

But the Georgia Auto Dealers Association had John B. Prince III testify about his 48 years running dealerships in Tifton, Albany, Valdosta and Douglas for eight vehicle brands.

"The franchise system is a proven and cost-effective distribution system," he said, explaining that competition keeps prices so low he takes a loss selling new cars and that bumping into customers in his hometown encourages him to give good service.

Similar legislation

In the House Energy, Utilities & Telecommunications Committee, a similar proposal is under consideration. HB 874 would amend the 41-year-old law that assigns each of the state's 95 electric utilities its own geographic monopoly. The bill would allow companies, like those with financial backing from Google and others, to essentially lease the rooftops of private property to install solar panels paid for by providing electricity to the property owner with the balance being sold to the utilities.

Georgia law prohibits that by only allowing licensed utilities to sell electricity - even to the owner of the rooftop. But for people who can't afford thousands of dollars to install photovoltaic panels, HB 874 offers a simple way to finance the switch to solar.

Analysis of 50 churches by Georgia Interfaith Power & Light found that most could benefit from installing the panels but only three could afford it.

If the utilities aren't advocating outright defeat of the bill, they are adamant about how it is worded.

"But the bottom line is for Georgia EMCs and Oglethorpe Power, we believe that the bill's current language could have unintended consequences on the Territorial Service Act that this legislature passed in 1973," said the electric membership corporations' vice president, Heather Teilhet.

Brew bill

The scene shifts to other committees considering allowing microbrewers to sell packaged beer outside of the legally mandated wholesaler system and weighing legislation that determines whether the smartphone-enabled ride-matching services Uber and Lyft can compete with licensed taxicabs.

Defenders of the status quo argue that the laws that have evolved over the years not only protect companies from unlimited competition but also consumers from bad actors.

"If you are a for-hire driver, there are certain things in Georgia that's always been expected: background checks, that you have liability insurance, and you're paying your sales taxes," Rep. Alan Powell, R-Hartwell, told WSB-AM about why he sponsors HB 907 to require Uber and Lyft conform to taxicab laws. "You don't want sex offenders and pedophiles driving out there and picking up the public."

These same battles are going on in legislatures across the country.

For many Georgia legislators these bills present a challenge. On one hand, they think of themselves as being supportive of business and the notion that competition breeds innovation which lowers price and expands consumer choice. On the other hand, the existing businesses say these new threats will hurt them and their employees.

Sen. Josh McKoon, the sponsor of the microbrewers' legislation, Senate Bill 174, acknowledges the validity of arguments made by opponents of his bill. The existing alcohol-distribution system played a role in maintaining competition so that there are dozens of major brewers while the soft-drink industry that isn't regulated consolidated into Coca-Cola and PepsiCo dividing that market between the two of them.

Even though he is sponsoring one of the "disruptive" bills, McKoon reflects the feelings of many of his colleagues when he talks about incremental change. After all, the state motto is "Wisdom, Justice and Moderation."

"Does that mean that we, in an overnight manner, junk an existing system? Probably not because that, in and of itself, creates a lot of market distortion," he said. "I think we have to figure out where we ultimately want to go, and then develop a gradual path to get to that end point."

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